Eurozone monetary trends continue to suggest that the economy will perform significantly better in 2013 than 2012. The six-month growth rate of Eurozone-wide real M1 deposits rose to 2.9% (not annualised) in February – the fastest since May 2010 and historically inconsistent with recession.

Importantly, real M1 deposits are now growing in the periphery, suggesting economic stabilisation or better in the second half of 2013 – see first chart. The pick-up has been led by Italy but weakness elsewhere has abated – second chart.

The key monetary concern now is ongoing real M1 deposit contraction in France, although this eased in February (and recent weakness may partly reflect transfers out of such deposits due to a raising of the investment limit on tax-free Livret A savings accounts). Elsewhere in the core, Dutch growth has slowed sharply – third chart.

These indications are, of course, subject to the substantial qualification that the unexpectedly large losses imposed on uninsured depositors in the two largest Cypriot banks could trigger renewed deposit outflows from the periphery, although some funds may be transferred from weaker to stronger institutions within the same country.

Gloomsters claim that the double dip occurred in the fourth quarter of 2011 and first quarter of 2012. Last month, the Office for National Statistics (ONS) estimated that GDP declined by 0.3% and 0.1% respectively in the two quarters*. Excluding North Sea oil and gas production, however, the changes were -0.2% and zero respectively. This implied no double dip in the onshore economy, in the conventionally-understood sense of consecutive quarterly contractions – see previous post.

The figures have now been revised again to show a GDP fall of only 0.1% in the fourth quarter of 2011 versus 0.3% previously. The decline excluding the North Sea is now 0.1% rather than 0.2%.

The total fall in GDP during the two quarters of the claimed double dip, therefore, is now just 0.2% compared with an original estimate of 0.5% in April 2012.

Revisions, of course, will continue for many years and are likely, on balance, to be upwards as the statisticians gain better understanding of the industries and firms that are leading the upswing – this has been the pattern in prior economic recoveries.

The double dip, in other words, is probably a myth that the ONS will consign to the dustbin of history at some future point when no one is any longer interested in whether one occurred.

Today’s update contained no change to the earlier-reported 0.3% GDP decline in the fourth quarter of 2012, which is entirely attributable to the unwind of the Olympics boost. The level of GDP last quarter, however, was revised up by 0.1%, reflecting stronger performance in earlier quarters.

*GDP also fell in the second quarter but even gloomsters admit that this was due to the additional Diamond Jubilee bank holiday so should be ignored.

A recent post questioned why Japanese bank reserves had fallen in early 2013 despite continued significant Bank of Japan (BoJ) asset purchases. It concluded that reserves weakness reflected a seasonal rise in the government’s balance at the BoJ and was likely to reverse in late March / April as this balance was run down.

Japanese reserves have, indeed, risen sharply in recent days, reaching a new yen record this morning – see first chart. Current asset purchase plans suggest a further rise of 63% by end-2013 but the BoJ is under strong pressure to expand these plans at its meeting next week – the first under its new leadership.

The Fed, meanwhile, last week gave no hint of any slowdown in its $85 billion per month pace of securities buying, which should continue at least through mid-year.

G3 bank reserves are currently still well down from end-2012, reflecting a Eurozone fall due to banks repaying borrowings in the two three-year longer-term refinancing operations conducted in December 2011 and February 2012 – second chart. Eurozone reserves, however, should stabilise or recover as the heavy losses imposed on uninsured depositors in the two largest Cypriot banks encourage precautionary outflows from weaker institutions in other countries, increasing their need for ECB funding.

The G3 reserves total, therefore, is likely to sustain its recent pick-up, reaching a new record later in the spring.